Do you exit the market after a bull run?

Wobblydeb

Just wondering what strategies people on this forum employ?

I am dithering between being a "buy and hold" investor and one who more actively sells after a bull run. The selling is the bit I struggle with though! I can spot when there is a good buying opportunity (like this summer) but that is no good to me if I don't have cash available.....

Do you sell after a bull run, and do you do that for both shares and funds?

If you do that, what do you do with the cash in the meantime? Alternative investments such as bonds, or gold, or just leave it in cash?

Reaper

Personally I would not sell and return to cash/gold unless I thought a widespread crash was on the way, but that is notoriously hard to do (though the signs are always obvious with hindsight!)

However what I do is after a sector has risen for a long time I may get nervous about it and switch to something that has underperformed. For example emerging markets/India/China have had a great run recently. At some point though people will buy into the market not because it is a cheap or the economies are strong, but just because it has been going up for so long that everybody wants in. At that point the growth becomes artificial and no longer reasonable. Sooner or later it will come crashing back down. Smart money gets in early and exits early.

There is a famous anecdote about the Wall Street crash which was that Bernard Barooke that he had his shoes shined every morning by the same shoe shine boy. One morning the boy started giving him stock tips and as soon as Barooke got to his office he called his broker and told him to sell everything. "When shoeshine boys are giving stock tips, it's time to get out."

As I say I don't think I could predict a global crash (sadly) but I can sometimes see when a sector gets over heated (I'm not saying Emerging Markets is now by the way - I am still adding new money there at present). At that point I will start to move it somewhere new. That's my form of cashing in.

getzegold

Wobblydeb wrote: »

Just wondering what strategies people on this forum employ?

I am dithering between being a "buy and hold" investor and one who more actively sells after a bull run. The selling is the bit I struggle with though! I can spot when there is a good buying opportunity (like this summer) but that is no good to me if I don't have cash available.....

Do you sell after a bull run, and do you do that for both shares and funds?

If you do that, what do you do with the cash in the meantime? Alternative investments such as bonds, or gold, or just leave it in cash?

the skill is identifying a run before or just at its commencement, get in early before everyone else does, then sell at the top. I assume your using a broker account so once you've sold your shares in a specific sector just leave the money in the brokerage account while you research and identify possible new opportunities and then buy into them. you can buy or sell both shares and funds in exactly the same manner, so theres no reason to treat, say a commodity ETF or any associated individual agricultural company shares any differently (an ETF just gives you a broader exposure to an underlying market) if you think the markets topped sell all related investments in that sector and put them into something else wether its bonds, gold funds, financials, commodities or stock indices, wherever you think the next opportunities are and you can do all that through any decent broker.

Loughton_Monkey

This is (or can be) an extremely complex subject. It sounds a very profitable strategy, and if you look at any historic graph of price history, you can calculate some astronomic profits if only you had sold at the top of each wave, and bought at the bottom again. But that's very pie-in-the-sky.

If you are really interested, you should seek out one of thousands of books/articles on "Technical Analysis", in which you will find 101 so-called 'strategies', together with complicated indicators.

However, I will give you my strong opinion:

Let us imagine you have set up a statistic index (as mentioned above) which purports to indicate optimum times to enter (or exit) the market, then the indicator has to work on an 'appropriate' amount of data. When you are day-trading, this means you are usually looking at ups/downs, peaks/troughs, over the last hour or two (maximum). If you want to trade on a more longer-term period, then these indicators have to be set over a much longer historical period. As a result, they are 'softer' and will 'allow' quite a dip, but still not tell to you sell etc.

Now investing (in funds and stocks and shares) is a much longer timescale. We are generally looking for good returns over a 5 year period (minimum). If this is what you want to do, then fine. If, however, you want to 'trade' the highs and lows on a much shorter timescale, then by all means do it, but I suggest you are becoming a "trader" and ceasing to be an "investor".

Inexperienced (and even experienced) traders can and do lose their shirts.

So it's far better, I feel, simply to take an informed view of market trends, and make minor adjustments on your portfolio, as perhaps Reaper is suggesting. Yes, after an unbelievable bull run, by all means 'bank' the profits and migrate some of it back to safer, but less spectacular investments.

However, be prepared for the disappointment of having made a wrong call.

Reaper

Something else you can do is "rebalancing".

Say you invested in 4 funds covering USA, UK, Asia, Europe putting 25% in each. After a year you noticed the Asia one had grown rapidly and now made up 35% of your total.

One option would be to move the extra 10% into the funds that had not performed so well. The idea is you don't want to end up too exposed to a single market.

Of course the starting percentages and sectors are whatever you choose but you get the idea. It is perhaps more common when rather than having all equity you might have a percentage of your money is "safe" areas which are not likely to grow as fast such as bonds and gilts.

I can't say I follow this strategy myself except in an informal way but I just thought I would mention it as an option.

getzegold

Loughton pretty much nailed except to say i wouldn't get too twisted up with tech analysis better to trade fundaments; for instance rare earth metals are getting rarer and are at the start of a bull market and theres talk of much higher prices in beef and pork next year due to the rises in corn, perhaps try and get exposure to that market, theres lots of opportunities you just have to do alot of research. tech analysis can't factor in things like floods or droughts or china baning the xport of rare earth metals or other such things.

edinburgher

One option would be to move the extra 10% into the funds that had not performed so well. The idea is you don't want to end up too exposed to a single market.

I'd been reading about this of late, but didn't understand why you'd want to move gains from a strong fund into a weaker performing fund? Hopes of future growth/stability, or just trying to stick to an investing style/ratio?

Real life example: my Aberdeen Emerging Markets Acc units are thrashing my Schroder US Mid Cap Acc units and there will likely be a real imbalance by the end of the year. Why would I buy more units of the Schroder fund?

The idea is you don't want to end up too exposed to a single market.

Does this apply when you're investing roughly equal figures to investments and one grows much faster than the other? If my initial spend is outperforming, wouldn't I be 'cutting off my nose to spite my face' to buy into the 'weaker' fund?

I cheerfully admit to being a new investor, any thoughts appreciated!

jem16

edinburgher wrote: »

Real life example: my Aberdeen Emerging Markets Acc units are thrashing my Schroder US Mid Cap Acc units and there will likely be a real imbalance by the end of the year. Why would I buy more units of the Schroder fund?

Main reason is that something that has the potential to grow a lot, also has the potential to lose a lot.

By taking off some of the gains and putting them into a less riskier fund you protect some of that gain.

All depends on your risk profile.

cloud_dog

An exit point / strategy is just as important (if not more so) than an entry strategy / point.

That's not to say jumping in and out is a good idea but as Jem16 says, protecting gains is what its all about.

I have a philosophy (born out of the Tech Stock crash) and that is to minimise losses not to maximise gains. (for 'losses' read protect my gains).

I'm no expert and don't always get it right but you need to understand your own situation and goals and attitude, and you need to feel comfortable with it, and I'm comfortable with my approach. Having said all this for our Pension (SIPP) investments I take a much, much longer view.

sabretoothtigger

If you sell shares then you are buying british currency, there is no way not to own something or possibly lose money by holding it

The main advantage to being in cash is it doesnt change value very much, less then 1% a day and some shares move 10% so you are reducing risk by going to cash usually

If the bull run meant the price of shares rose 10% and the british currency fell 10% while you held the share, you havent gained anything and theres no reason to sell because the company hasnt risen in value since you bought.


The problem is all that is very confusing and its hard to keep track of what is the worth of anything. Every day there is inflation, alot of companies arent even in this country so how can you know whats happened in Australia or wherever

BP isnt really uk, its all over the world. At least a third of BP is in russia, I havent a clue whats happened in russia this month
8.6% of the ftse 100 is hsbc and most of their company is in asia, so whats their worth. no idea


I think selling shares to buy another share is often best, if they are similar its easier to compare. I sold Bradford and Bingley to buy standard life, I thought SL was too cheap (it was a forced sale) and b&B had already risen more then I expected it to

They are both finance companies with risk (and profits) in the money markets, one looked a better bargain so thats how I suggest people should weigh up their choices

minimise losses not to maximise gains.

buffet is rich because he has almost never lost money. So thats 50 years of compound gains with no deductions

blinko

in a bear market defensive stocks will perform well eg tesco, utilities

im about 39% in commodities which is too much but im riding the upward trend and looking to make a move in the next couple of months but so far its my best performer

im in india too and again thats well priced so looking to move out of there, there is an IPO soon which i am keeping a close eye on im hoping the appetite will be hungry in which case i still think there are legs

bonds and sov debt worry me but things go up and down all the time but as above its about protectuin the gains you need to read on here and news boards ft and keep upto date with the markets also newspapers like the suna re good to read sometimes

as you know when the sun hears about it, its generally time to sell

by the FT everyday this week and this will give you a good idea of the market moves

its impossible to time these things but try and set yourself targets eg 20% loss on a asset is my limit but i let the gains ride away

as before its not easy and dont let emotion make decisions let data make them and good luck